One policy that this essay will cover as a way to reduce the unemployment level is monetary policy. Monetary policy is the manipulation of interest rates and more recently quantitative easing to control the economy. For the UK, this is run by the ‘Monetary Policy committee’ within the Bank of England. At the moment, interest rates are at 0.5%, which is very low and the committee intends to make the most of this by using this to create an increase in consumption. If interest rates are low then it is cheaper for consumers to borrow and so they may increase spending using borrowed money. This would lead to an increase in aggregate demand. Since, labour is a demand, an increase in consumption would lead to an increase in demand for labour, hence reducing the unemployment level in the UK because companies/firms, need to meet the increase in demand by hiring people to produce whatever is demanded.
However, this will not always work as companies can often have their goods stockpiled and so when the demand increases, they can just sell their existing stock and not need to increase their staff. To add to this doubt, banks are known to reluctant to lend to people and so they might not get the sufficient funds to spend more anyway.

Another policy that should be considered is the fiscal policy. Fiscal policy is how the government uses its powers over spending, taxation and borrowing to affect the economy. One method to increase employment is by increasing aggregate demand through an increase in spending. An increase in government spending would result in a rightward shift of the AD curve when drawn. The result of this is an increase in output. The increase in demand should lead to firms taking on more staff to meet the increase in demand. However again, firms may just sell off stock and increase capacity thus not employing more workers. If an increase were to occur though,